Asia diesel demand to hit 9.78m bbl/day by 2015 - consultant

02 August 2012 05:07  [Source: ICIS news]

SINGAPORE (ICIS)--Asia’s demand for diesel is expected to grow by 13% over the next three years to 9.78m bbl/day in 2015, with China expected to drive the growth, industry consultant Wood MacKenzie said on Thursday.

This year, demand is estimated at 8.65m bbl/day, the firm said in a statement.

By 2015, China – the world’s second biggest economy – is expected to import about 300,000 bbl/day of diesel/gasoil, representing a six fold increase from 2010, Wood MacKenzie said.

“Chinese demand growth will largely be driven by commercial freight,” the consultant said in the statement.

Taking into account the projected strong growth in demand for diesel/gasoil, Wood MacKenzie said that Asian refiners will have to shift production away from gasoline, the supply of which is in surplus.

“Increasing deficits for diesel/gasoil in Asia’s emerging economies provides an opportunity for refiners with flexibility to switch from gasoline to diesel/gasoil and increase their profit margins,” it said.

“Due to a gasoline surplus, gasoline crack spreads versus Dubai crude are expected to reduce from 2010 to 2015, while diesel crack spreads are expected to strengthen from $15.8/bbl in 2010 to $20.3/bbl in 2015,” said Sushant Gupta, senior downstream analyst at Wood Mackenzie, in the statement.

“To balance out the market for gasoline and diesel, as well as to secure profit margins, Asian refiners need to strategically shift on an average one-percent of production from gasoline to diesel,” he added.

The consulting firm projects Asia’s gasoline surplus to grow by 70,00 bbl/day from 2010 to 2015, mainly due to upgrading investments in Taiwan and South Korea, which will require more exports out of Asia.

By 2015, however, Indian private refiners, primarily Reliance Industries, and Singapore exporters may have to significantly reduce gasoline exports from about 140,000 bbl/day as their key markets – US, Iran and UAE – become more self-sufficient, Wood Mackenzie said.

“Refiners may face some challenges around the flexibility to switch yields with limitations around refinery configuration; crude slate for the refinery; overall economics of making this shift; and investment justifications needed to increase the flexibility,” Gupta said.

“However in a situation where a refiner is unable to find markets for surplus gasoline and is unable to switch yields, its utilisation rates could come under pressure and affect profit margins,” he said.

By: Pearl Bantillo
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